CFD or SB company for long term futures trading

Asamat · Mar 17, 2009

Hi,

I'm in the following situation and look for a advice and a recommendation for a suitable CFD or SB company. Any insight would be welcome.

I'm trading futures, using a long term system (LTTF). Holding time is weeks and months for winners, it's strictly EOD. Due to the high contract value and large vola my universe of accessable instruments is restricted, excluding currently for example the energy futures and the big stock indices. I'm a German resident, so tax considerations - while I envy the situation of my British colleagues - are not of consideration to me (CFDs, spread-bets and futures are taxed identically in Germany).

Within the last days I have read a lot about CFD- and SB-companies, and got the idea to "diversify", and trade the accessable markets at my current broker, plus fractions of the large contracts at one of these companies.

a) What is your opinion or advice regarding this? Is it feasible?
b) I could not find threads discussing this, and I wonder why. Any idea? Did I simply search with the wrong words?
c) Would you go for CFDs or SBs?
d) How in your experience compare futures, CFDs and SBs in practical execution of long-term trades? My understanding is that the spread is lower for futures, what about slippage? What other possible costs? I calculate 8% avg slippage for futures.
e) In your opinion what company or companies would be the most suitable for this undertaking?

Thanks,
Asamat

gle101 · Mar 19, 2009

Asamat said:
Hi,

I'm in the following situation and look for a advice and a recommendation for a suitable CFD or SB company. Any insight would be welcome.

I'm trading futures, using a long term system (LTTF). Holding time is weeks and months for winners, it's strictly EOD. Due to the high contract value and large vola my universe of accessable instruments is restricted, excluding currently for example the energy futures and the big stock indices. I'm a German resident, so tax considerations - while I envy the situation of my British colleagues - are not of consideration to me (CFDs, spread-bets and futures are taxed identically in Germany).

Within the last days I have read a lot about CFD- and SB-companies, and got the idea to "diversify", and trade the accessable markets at my current broker, plus fractions of the large contracts at one of these companies.

a) What is your opinion or advice regarding this? Is it feasible?
b) I could not find threads discussing this, and I wonder why. Any idea? Did I simply search with the wrong words?
c) Would you go for CFDs or SBs?
d) How in your experience compare futures, CFDs and SBs in practical execution of long-term trades? My understanding is that the spread is lower for futures, what about slippage? What other possible costs? I calculate 8% avg slippage for futures.
e) In your opinion what company or companies would be the most suitable for this undertaking?

Thanks,
Asamat

Yes you could diversify your trading going for SB or CFDs. Or if you would like to hedge your portfolio for one reason or the other. Anyway I am kind of surprised to read that SB is taxable in Germany, absolutely sure about this? In Sweden SB is not taxable yet. But the tax officials regard SB to be financial instruments, which could indicate in can become taxable in the future. There is always an issue about execution with SB, but today most of the top companies are reliable in "normal" market conditions. You have to look at different companies, who allow large bets and read about them at T2W forums to get up to date feedback from traders.

Asamat · Mar 19, 2009

Thanks for your answer.

Yes, I'm sure about current handling of taxability of SB in Germany. This has not been fought to the highest courts to get a fundamental decision, but I do not intend to be the one doing it. The normal tax authorities will regard it as taxable.

gle101 said:
... You have to look at different companies, ... read about them at T2W forums ...

I already read a lot of the threads discussing different companies. Unfortunately most people here seem to be scalping or do very short term intraday trading, and correspondingly most discussions are about things relevant for that, for example spread and tight stops. I'm more interested in, but found nothing about, what are the aspects when you hold positions many days, weeks or months.

Spread is not that important then, but what about wide stops. Are these being hit, probably in the non-market hours, by strange spikes not present in the underlying?

What about financing costs? Are these calculated correctly, or prohibitively exensive?

I know what the companies write on their pages. I'm interested in actual experience with what the companies promise.

Regards,
Asamat

Xeno · Mar 19, 2009

Futuresbetting.com will be the closest you get to trading real futures. There should be no worries about spikes to your stops, or long term holds etc. In terms of financing, if your account is negative in a particular currency there's a small interest charge. I can't think of other charges. Hope this helps. You *may* need to live in the UK to use them though...

Hittfeld · Mar 20, 2009

I think you won`t find a lot about long term cfd holding strategies. The reasons are manifold: For a long term strategies options (especially LEAPS - small time decay) might be a better way to go.

Going via cfds means financing the whole buying amount at 2-3times normal interest rates. But not receiving any interest on your deposits - which should not only cover the required minima, but intraday and overnight volatility as well - plus suffiecient saftety margin to avoid stop fishing.

My personal experience was not the best (steal4free), just using a standard US margin account (and full margin) was much better costwise.

Regards

Hittfeld

Hittfeld · Mar 20, 2009

Asamat said:
c) Would you go for CFDs or SBs?

d) How in your experience compare futures, CFDs and SBs in practical execution of long-term trades? My understanding is that the spread is lower for futures, what about slippage? What other possible costs? I calculate 8% avg slippage for futures.

1. I wonder if foreigners are eligible for SB accounts. Not to my knowledge.

2. There`s hardly any spread for futures if you compare them to cfds. And slippage depends on liquidity of the contract - but spread plus slippage plus commision will still be cheaper than spreads of cfds alone.

3. I don`t really understand your 8% number. Slippage? Never! maybe you mean margin.

4. In practical terms, if possible I use futures -- but there are only a few of them and some are just too big, if so, I use etfs tracking the futures or spot market.

5. Using etfs or equity ---- if the underlying is not a stock, but a basket (like DIA, SPY or QQQQ) its a time bomb taxwise for germans: If you hold qqqq`s you will be taxed even if the etf (Nasdaq100) is loosing money. Taxed heavily : Schwarzfonds!

Regards

Hittfeld

gle101 · Mar 20, 2009

Hittfeld said:
1. I wonder if foreigners are eligible for SB accounts. Not to my knowledge.

Yes many of the top SB companies allow foreigners to sign for an account. Unless of course, you're located in the US that is.

Asamat · Mar 20, 2009

Hittfeld said:
3. I don`t really understand your 8% number. Slippage? Never! maybe you mean margin.

Sorry, I was not precise. My number means 8% of the daily high-low-range. That is an average over many markets. Obviously it's market dependent, but 8% on average - while conservative - is not too far from the truth.

CFD or SB company for long term futures trading

Asamat

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gle101

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Asamat

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Xeno

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Hittfeld

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Hittfeld

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gle101

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Asamat

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